Revisiting International Cooperation on Illicit Trafficking by Sea: Indonesia and the Final Voyage of the M/V Wise Honest (Part II)

[Arron N. Honniball is a Research Fellow at the Centre for International Law (CIL), National University of Singapore, Singapore. Funding was provided to CIL by a Singapore Maritime Institute Grant (SMI-2019-MA-03).]

Introduction

Part I of this two-part post reviewed the M/V Wise Honest’s final voyage against the UNSC framework that prohibits such illicit trafficking by sea, followed by the rights and practice of Indonesia in interdicting the M/V Wise Honest. Part II discusses what happened – and what should have happened under the UNSC Resolutions – once the M/V Wise Honest was in Indonesian custody. The post concludes with a few points for Indonesia and other states to consider when moving forward.

Addressing Persons Involved in Illicit Trafficking

Difficulties for Indonesia surfaced once the M/V Wise Honest was detained. It became clear that domestic implementing legislation had not been adopted in respect of Indonesia’s UNSC obligations (para. 27; Septiari and Adri). Therefore, despite the M/V Wise Honest’s engagement in countless activities contributing to a threat to international peace and security and prohibited under UNSC resolutions, the persons involved have escaped with minimal repercussions.

For example, the captain of the M/V Wise Honest was eventually only charged with being in charge of an unseaworthy vessel (Case No. 682/Pid.B/2018/PN.BPP; Law (Indonesia) No. 17 of 2008, Article 302(1)). This was because the false claim to be flagged to Sierra Leone resulted in improper documentation required to demonstrate seaworthiness within Indonesian waters (Law (Indonesia) No. 17 of 2008, Article 117(2)(f)).

Apart from not holding the captain accountable for the actual illicit trafficking, the punishments for unseaworthiness are neither comparable nor a deterrent. With a maximum 3 years imprisonment or a 400,000,000 Indonesian Rupiah fine, the court opted for the later. Even by imposing the maximum fine possible, this equated to USD $28,500 (para. 24) – a mere 1% of the illicit coal’s contractual value. Three months later the captain and crew were in the process of repatriation to North Korea (para. 6; para. 24).

Other persons involved likewise exploited this ‘regulatory vacuum’, most notably the Indonesian brokers ‘Eko Setyamoko’ and ‘Hamid Ali’ (para. 36). As Indonesian nationals, Indonesia should have prohibited their involvement in, for example the procurement of DPRK-origin coal, or its STS transfer. Without domestic implementation, Setyamoko was able to successfully request the return of the illicit coal aboard the M/V Wise Honest (Case No. 682/Pid.B/2018/PN.BPP) and obtain authorisation to re-export the coal in breach, once again, of UNSC Resolutions and Indonesia’s obligations (below). As summarised by the Sanctions Committee:

“The decision by the District Court to release the illicit coal and approve its re-export by the same broker who had facilitated the illegal transaction once again demonstrates the clear need for Member States to prioritize the incorporation of Security Council resolutions into national law. The lack of such a legal framework allows the Democratic People’s Republic of Korea and complicit actors to exploit shortcomings” (para. 27).

Offenders are first and foremost motivated by the large profits available when dealing with DPRK-origin coal (para. 37). Without effective domestic implementation to prohibit such conduct, punishable by deterrent sanctions, the actor’s conduct is unlikely to change.

Addressing Vessels Involved in Illicit Trafficking

Difficulties for Indonesia then carried through to its obligations in respect of the M/V Wise Honest. Unseaworthiness charges resulted in the return of the vessel to the Captain, rather than the vessel being impounded. States are encouraged, but not obliged, to impound offending vessels found in their territorial sea (Res 2397, para. 9). A lack of any possibility to even consider doing so is arguably inconsistent. States are however also obliged to impound vessels found in their ports, if previously involved in illicit export of coal or STS transfers (Res 2397, para. 9). The M/V Wise Honest episode demonstrates Indonesia’s exercise of port state jurisdiction remains lacking in this instance.

For this particular vessel a cooperative multilateral solution was found. Indonesia granted the USA’s request for mutual legal assistance (para. 6) following a U.S warrant for the vessel’s arrest on a civil forfeiture suit (18 U.S. Code § 981; para. 45). To the protests of DPRK (MFA), the M/V Wise Honest was transferred to US custody and towed to American Samoa. The USA imposes both UNSC-mandated and unilateral sanctions on economic relations with DPRK, the later ranging from unilateral port state jurisdiction to the unilateral regulation of transactions involving USD or US-based banking systems (US Treasury 2020, Annex B). Despite the added risks, it appears those involved in illicit trafficking, including by the M/V Wise Honest, still prefer USD over RMB (paras. 44). As USD wire transfers are “typically cleared through banks in the United States” (para. 40), the USA has a territorial nexus by which to regulate said transactions.

The US complaint (19 Civ. 4210) established that the M/V Wise Honest’s owner was a subsidiary of a Specially Designated Nationals, ‘Songi Trading Company’, an entity prohibited from accessing the US banking system. Apart from the planned payments for coal and heavy machinery in USD (Annex 17; para. 27) a nexus to the M/V Wise Honest was provided by its improvements and expenses being paid in USD, via the US banking system (paras. 39-44). This resulted in the unlawful export of financial services from the USA (para. 20), and thus the “M/V Wise Honest constitutes or was derived from proceeds traceable to violations of the International Emergency Economic Powers Act” and “constitutes property involved in money laundering transactions” (paras. 49, 53).

Furthermore, apart from the clear benefits to US foreign policy, it appears evident that the burden of implementing and enforcing UNSC Resolutions may be somewhat offset by appropriate port and coastal state enforcement measures. Indonesia’s lack of penalties resulted in only minor fines and non-seizure of the vessel or illicit cargo, despite the costs of a very useful and thorough Indonesian investigation (shared with the 1718 Sanctions Committee), and the compassionate repatriation of the crew by Indonesia. The US government however was successful in its claim of forfeiture to the M/V Wise Honest, which has since been auctioned for scrap and it reportedly now beached in Bangladesh. The families of Otto Warmbier and Kim Dong Shik successfully petitioned for compensation payments against the proceeds of the M/V Wise Honest sale (Judgment, 19 Civ. 4210 (PKC)). Furthermore, during the M/V Wise Honest’s five month stay, the port authority of Pago Pago (American Samoa) was reportedly able to successfully charge at least USD $46,000 in port services and charges (2) to the vessel’s agent and insurance provider.

To conclude, one should not take for granted that in all cases there will exist, (a) another state with jurisdiction and, (b) that state’s willingness to take on the burden of legal proceedings. Indeed, despite the USA’s enthusiasm for ‘maximum pressure’ on DPRK, this was the first time it took possession of an offending North Korean vessel. Indonesia needs its own domestic laws implementing the UNSC Resolutions framework, which will both enable it to fulfil its obligations and reap some of the benefits that may offset the costs of compliance.

Addressing the Illicit Shipment Itself

Finally, as previously mentioned the Indonesia court allowed re-export of the illicit shipment of coal in breach of its obligation to prohibit such transactions within its territory, or by its nationals. This was also counter to Indonesia’s obligation as a coastal or port state to seize and dispose of the illicit shipment upon its discovery during the territorial sea, or in-port, inspection (Res 2375, para. 22; Res 2397, para. 20). Indonesia had been reminded of its obligations by the Panel of Experts (para. 36), but apparently did not have domestic competencies to do so. Allegations of judicial bribery have also surfaced (denied during judge’s conviction in another case).

Due to space constraints, a thorough discussion of the illicit coal’s subsequent voyage from Indonesia will be left to a follow-up publication. However, in brief the illicit coal was transhipped to the Panamanian (sometimes Vietnamese) flagged M/V Dong Thanh (IMO 9180035). Malaysia, in line with its obligations concerning the illicit cargo aboard the M/V Dong Thanh (Res. 2270, para. 22), denied port entry at Kemaman on 13 April 2019 (para. 26). On 6 June 2019, the M/V Dong Thanh entered Vietnam’s internal waters whereupon it was interdicted and inspected (para. 28), in line with Vietnam’s obligations (Res 2397, para. 9). According to the latest report, it remains in custody “pending a final decision in line with the relevant applicable Vietnamese laws” (para. 81). Given the reported involvement of the same shipping operators, the same broker and the same customers as the M/V Wise Honest’s conspiracy (paras. 26, 28), one hopes, if verified, Vietnam will be able to bring this illicit trafficking episode to an end, with financial consequences for all those involved.

Conclusion

The Covid-19 pandemic may have put a significant halt to the illicit shipments of coal from the DPRK. However, all states – including those in Southeast Asia – should re-evaluate the readiness of their legal framework to adequately respond to their legal obligations when called upon by the UNSC. The DPRK has reportedly already acquired replacement vessels (Byrne et al., p. 35), suggesting illicit trafficking by sea remains a probable mechanism to finance its weapons programs in the foreseeable future.

In general, should the threat to international peace and security originating from the Korean Peninsula be resolved, it remains a sad truth that new challenges will emerge, requiring UNSC-mandated maritime measures under Chapter VII. By adopting appropriate legislation now, implementing, in general, Chapter VII maritime measures, states will be well-equipped to address current and future maritime security challenges.

Finally, to conclude on a positive note, Indonesia is in the process of reviewing (para. 27) and reforming its domestic implementing laws and institutional framework. The M/V Wise Honest has played a role in stimulating discussions (e.g. on money laundering, pp. 14-15). This author is not aware of any drafts currently in the public domain but awaits this positive Indonesian contribution which could also serve as a model to assist other states.